As of 1st January 2015, The Bahamas implemented a Value Added Tax on many goods and services. The new Value Added Tax or VAT is a consumption tax on goods and services which affects individuals as well as businesses. Both Bahamian residents and travelers to The Bahamas should be aware of how the tax affects transactions.
The VAT applies to purchases of a variety of goods and services, including goods such as food items, furniture and clothing and services such as insurance premiums and legal services. It also replaces the former 10 percent tax on hotels and home rentals. Value added tax must be paid on most goods and services made or provided in The Bahamas by businesses which are registered to collect VAT. Sometimes the tax applies to goods or services imported from outside The Bahamas. Occasionally, a good or service made or provided in The Bahamas but “used or … enjoyed by a recipient that is outside of The Bahamas” is taxable at a rate of zero per cent.
While people purchasing goods and services pay the VAT, the businesses that provide those goods or services must collect the tax and remit it to the Bahamian government – specifically, the Comptroller of VAT. Not all businesses are required to collect and remit VAT, only those that are “in business” who have registered with the Comptroller. Your business must mainly be involved in supplying goods or services to people in return for payment. Self-employed people and some charities and clubs may qualify as being in business. Making occasional, “one-off” sales does not mean that you are in business for VAT purposes. Further, businesses only need to register with the Comptroller to collect VAT if the value of their taxable goods and supplies exceeds a particular “VAT threshold” for the year. Currently, the VAT threshold is $100,000.
The Bahamas' value added tax program has two tax rates depending on what good or service you purchase or sell. The standard tax rate is 7.5 percent, while the zero tax rate is 0 percent. In addition, some goods and services are exempt from tax or fall outside the VAT system. Examples of goods and services taxed at the zero rate are land located outside The Bahamas, and some professional services whose recipients are located outside The Bahamas. Some examples of exempt goods and services are life insurance sales, school tuition, rent for living quarters, and lotteries.
To find out more about tax laws in The Bahamas, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.